Sign InRivian (RIVN) Shows Growth Potential Despite Overbought Conditions, Rated as BUY
Summary
Rivian Automotive, Inc. (RIVN) shows promising potential for growth with ample cash reserves and a positive outlook in the electric vehicle market, making it a potential BUY despite short-term overbought conditions and negative earnings per share (EPS). (July 20, 2023)
Fundamental Analysis
Rivian Automotive, Inc. (RIVN), trading on the NASDAQ exchange, has a market capitalization of $24.04 billion. The electric vehicle maker closed at $25.81 on July 20, 2023, indicating a 3.95% increase from the previous trading day. However, its performance over the's past 52 weeks displays its volatility, fluctuating between a low of $11.68 and a high of $40.86.
Rivian has an average trading volume of 42.57 million shares, but the trading volume on July 20 exceeded the average, reaching 78.86 million. The increase in trading volume suggests heightened investor interest in the stock.
Nonetheless, Rivian's earnings per share (EPS) is currently unimpressive at -$7.12, leading to a negative price-to-earnings (PE) ratio of -3.62. The negative figures demonstrate that the company is not currently generating a profit.
Recent news indicates Rivian has an ample $12 billion cash reserve, which it's actively investing in the business. Furthermore, analysts predict a boom in the EV market, which will potentially benefit manufacturers like Rivian.
Technical Analysis
Rivian's relative strength index (RSI14) is 83. An RSI above 70 typically indicates an overbought condition, suggesting the stock may be due for a price pullback in the short term.
The stock's 50-day moving average is $16.61, and the 200-day moving average is $20.43. Both figures are below the last closing price, signaling a positive price momentum in the medium term.
The moving average convergence divergence (MACD) for the last three months is 3.67. A positive MACD reading denotes bullish momentum, supporting further price increase.
Forecast
Rivian's discounted cash flow (DCF) is $38.48, suggesting the stock might be undervalued. Additionally, various analysts predict a median target of $35, with high and low estimates ranging from $147 to $14.
Evaluation
Despite having a rocky start with negative earnings per share (EPS), Rivian seems poised for growth. It has substantial cash reserves for reinvestment and operates in an industry with strong predicted growth. Moreover, technical indicators point to positive momentum, despite short-term overbought conditions.
Therefore, considering these factors and the optimism among analysts, Rivian (RIVN) could be rated as a BUY. However, the existence of negative earnings and the overbought conditions emphasize the need for risk management and careful monitoring. Investors should keep track of the market and news that may impact Rivian's business, such as shifts in the EV industry, competition, and the company's execution on its business plans.
